For 12 years, Ann Arbor, Mich., remodeler Gary Rochman expertly steered his company along on an even keel. Trained in both architecture and carpentry, he loved the flexibility and control of being able to execute every aspect of a job. A self-described anti-growth advocate, he was selling $400,000 worth of work per year for his company, Rochman Design-Build. Then, five years ago, he got married and started a family, and everything changed.
“Suddenly I'm realizing, wow, this is fun, but it's not providing me with the income I want, need, or deserve,” Rochman recalls. “I had gotten stuck in my ways about how I operate and thought, OK, I need to view my business differently.”
When a small business fails, there's only one thing to do: get up, dust yourself off, and go on to the next thing. But when success pushes a company to grow, the road ahead isn't quite so clear.
After the initial satisfaction of running a thriving business, most remodelers come to a crossroads: Do I turn away the extra work and stick to a comfortable routine, or do I expand and hand off certain tasks to other managers? How do I invent new systems to handle the added complexities? Do I have what it takes to push the company to the next level of sustainable growth and profitability? It's a good problem to have, one that scores of remodelers are facing in the wake of the recent real estate boom.
Steven S. Little tackles this conundrum in his book, The 7 Irrefutable Rules of Small Business Growth. Whether a company's revenues are at $400,000 or at $4 million, he says that to get to the next level, you have to be driven to do something. Ultimately, your motivation can't be just about wealth accumulation, or, for that matter, that you love to lay grout. “Those reasons can work for you for 5 or 10 years, but eventually a higher calling than the almighty dollar leads to people who can really run a business —solving a problem that's never been solved, serving a community, or making lives better,” Little says. “These become the issues, not keeping the profits.”
Staying a Step Ahead Many remodelers get to a certain level of sales volume and then stumble as they try to add staff and office systems while signing up new clients. Linda Case, founder of Remodelers Advantage, Laurel, Md., counsels business owners to get their financial house in order before they forge ahead. “You must have pieces of paper that tell you quickly that you're OK or that you have a problem,” Case says. “The later you develop reports and systems, the harder they are to develop; the faster you're going on the growth track, the higher the risk.”
Naples, Fla., remodeler Jonathan Levy followed that advice when he retooled his business plan several years ago. He and his wife Kim went so far as to put their small company, Homeworks, on hold, spending 18 hours per week over the next year-and-a-half with a business consultant to hammer out the details of a sibling startup called Builders Integrity Group — and living on a shoestring. “We sacrificed taking large draws to self-finance the startup,” Levy says. “It hurt.” But the dedicated advance planning is paying off. Since launching the new business in 2003, the Levys have doubled their revenues yearly and are projecting $3 million in 2006.
The turning point? For years, the old company had been routinely taking on $25,000 bathroom remodels. When it set a minimum job cost at $100,000, its average job size went from $75,000 to $225,000. “That's when we started breaking through to a new level of growth,” Levy says. “A $20,000 bath takes as much work to do as a $100,000 one because it has the same components, and the smaller jobs eat you up time-wise.”
Of course, Builders Integrity Group's infrastructure makes this higher volume possible. Whereas Homeworks was composed of just the two of them in a home office subbing out fieldwork, the new company moved to commercial space and added nine staff, including an accountant, a project manager/salesperson, three superintendents, two laborers, and two carpenters. Ramping up staff size meant springing for networked computers and Intuit's Master Builder software, which links estimating, project management, and accounting. And in addition to adopting a protocol for top-drawer customer service, the Levys spent $18,000 to create a new identity with a Web site, a trade show backdrop, a brochure, and slick, professional postcards.
This year they've upped the ante again by raising the minimum job size to $400,000. “We're trying to have fewer projects at a higher value so we won't have to hire more people,” Levy says. Meanwhile, Homeworks is still incorporated, and he hopes to eventually revive it to handle small jobs. “We've shaken our reputation in town for smaller things, but there's still a need for those projects,” he says. “If we ever start doing small jobs, [Homeworks] will have its own identity.”